The Odd September Unemployment Rate: When Good Surveys Produce False Results

While the economy stumbles along, no one would expect a sudden jump in employment. Job growth has averaged about 100,000 per month over the past six months, roughly consistent with other economic indicators suggesting slow growth. But the Labor Department reported today the unemployment rate fell from 8.1 percent in August to 7.8 percent in September, which makes a full half-point drop since July.

These results suggest something very strange is going on with the household survey. In this hyper-political season, some who should know better and some who know little at all are suggesting the Obama Administration is playing games with the numbers. This is almost certainly not the case. The professionals at the Bureau of Labor Statistics would never stand for it, and like all good bureaucrats, they have ways of getting the truth out. Something strange is going on, but not politics—rather, statistics caused this little rhubarb.

The federal government runs two main jobs surveys. The payroll survey queries employers and is more reliable mostly because it is a fairly large sample. The second survey queries households and is much smaller, but provides a different look at the employment picture. The household survey also generates the unemployment rate. Typically, the two surveys disagree somewhat month-to-month, but track fairly well with one another over longer periods of time, because over longer periods of time, the small size of the household survey matters less and less.

Because they are samples, there are margins of error around the reported figures, just as political polls are reported with margins of error. The larger the sample, the smaller the margin of error, but what this really means is that with a substantial probability, the true figure lies within the margin of error.

Probabilities are not certainties, however. If a survey reports a margin of error with a 90 percent probability, this also means that one time out of 10, the correct figure will be much lower or much higher. Even a 99 percent probability means that one time out of 100, the true figure will be much different than the reported figure. One time out of 100 means about once every eight years for a monthly survey.

What seems to have occurred with the September household survey is that one time in 100. The household survey, a relatively small sample, reported an astounding 418,000 jobs jump in the labor force at a time when it has been steadily shrinking, and the survey reported an 873,000 jobs jump in employment at a time when the economy is stumbling.

To be sure, there are instances when the household survey’s result can jump, as when the government gears up for the decennial census or when the Labor Department resets the entire series. Aside from these understood anomalies, none of which apply today, the last time the household survey showed such a huge jump in employment was in 1983 during the Reagan-era economic boom. Today’s economy does not look much like the Reagan boom.

The September household survey is one to set aside to wait for a more reliable report next month, which will almost certainly reverse the odd results from September. If it does, then we have both confirmation of the power of statistics and of the weakness in the economy. If the next household survey is like the September survey, however, then we will know the Obama Administration was playing games with the numbers as alleged. The odds against two such anomalous reports back-to-back are not 100 to 1, but 10,000 to one, or about once in 800 years.

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JD Foster is the Norman B. Ture Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation. His primary focus is studying long-term changes in tax policy to ensure a strong economy. He also examines changes in Medicare, Medicaid and Social Security so they are both affordable and more effective.

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Personally I don't belive the numbers put out during this administrations time in office. (they have been politicized ever since day 1). No president (before this one) has ever used reducing the workforce participation rate to reduce the un-employment rate, AND had the media to push less in workforce is a good thing. It's deplorable and deception to claim that "the new norm" is acceptable.

Funny how no conservatives believe the numbers when they look good for Obama. His unemployment recovery from his first full month in office to this point in his firts term is 5 times better than Reagan's at this point (.1% decrease compared to .5% decrease). Somehow Obama now runs the BLS?

the problem is that when you find out that a whole states numbers are missing and then we are being told that the rate dropped to 7.8, what do you think is a reason for that happening 3 weeks before the election?

I’m sorry, Stirling, but I believe you’re wrong. I agree with you that it is ridiculous to bring the “unemployment rate” down because so many people have given up looking for work, but that is not something new that the Obama Adminsitration cooked up. It is how the numbers have been calculated for quite some time now..

I suggest you should head over to FRED and plot the month-to-month change in employment levels. In percentage change the increase of 873,000 amounts to an increase of 0.60%. Compared to the last 60 years there were 48 months where the economy added jobs at a faster rate. Given the large loss of jobs during the recession the increase in jobs is really not that impressive anyway, certainty not an anomaly.

It's the timing of a "1 in a 100" report that has people questioning it. Of all the labor reports during the last four years, this one is the most important to Obama's re-election. Many votes will have already been cast prior to next month's report.

“If a survey reports a margin of error with a 90 percent probability, this also means that one time out of 10, the correct figure will be much lower or much higher.” Wrong, what it means is that one time out of ten, the correct figure will be lower or higher — not “much” lower or “much” higher. A figure barely outside the margin of error is far more likely than a figure far removed from the statistical center.

“The September household survey is one to set aside to wait for a more reliable report next month, which will almost certainly reverse the odd results from September. If it does, then we have both confirmation of the power of statistics and of the weakness in the economy.” True enough, to an extent, but how many votes will have been already been cast in toss-up states by then? And how many votes will obama have garnered that wouldn’t have gone to him without a bump caused by a relatively good-looking September unemployment rate? It’s likely to take a mere handful of votes to swing some states from a win for one candidate to the other. It’s not as if this possible outlier result occurred in June or July.

I have never really placed a lot of confidence in surveys. Mainly due to the margin of errors. Plus wanting to know who is in the survey to begin with. Not their name or actual identity. But, if their background includes more than 50% Dem or Rep, Low-Middle-High Income brackets, Race (since society will not give up racism it is a factor), Gender, etc. I guess when it comes to the Unemployment it is now a waiting game. October results will tell all, hopefully it will not be too late for the Election. (Facebook: Jenny's Rants and Raves)

My son, who's unemployment bens are about to expire, went to a job fair in Ft Myers, Fla, there were 10 times the job seekers as there were jobs, does this tell you anything?? I have 2 other sons that are house painters, they also do small jobs and pressure wash houses, they are averaging 5 days a MONTH in work, because they are independent contractors, they do not get any benefits or unemployment. Before Obama and the loosening on Illegal immigration, they were working 5 and 6 days week. I also have a24 Yr oldgrandsn, who cannot get work, he also does not get uemployment, these people do not count in he fiure released, truth is the TRUE unemploymetis close to , if not over 11%, BHO and his cronies lie to get re-elected, also the COL has gone up and not acknowledged , I know it full well, 2 years ago, I spent an average of $150.00 a week to feed all 5 of us, this included cleaning supplies and paper goods, NOW I spend $250.00 and more a week and I am cutting corners I didn't do 3 Years ago, I do us coupons and cook meals that make or left overs. We ned the TRUTH from this WH, not white washing.

Did anyone not expect the jobless rate to drop just before the elections? We all know Obama and his team are manipulating the numbers, so why acted shocked that Obama continue to lie and deceive. That is just his nature. We all must understand this guy has no moral compass. He has not scruples, he has no honesty. He is a Marxist that was sent here to destroy this nation as we know it.

In July, Obama signed the directive that eliminated the Welfare to Work requirement. This meant that those individuals that previously were required to sign up at the local unemployment office as looking for work were NO LONGER required to do so. I would imagine that this fact alone could account for possibly thousands of people across this country affected by this presidential directive. This would be seen as 'thousands' falling off the unemployment rolls, therefore causing the unemployment RATE down. The question is, when Obama did this, did he plan on this outcome result occuring before the election? I think he did, I wouldn't put it past him…………..

We have all been spoon fed the process for determining unemployment as it currently exists. Maybe we should compare the number of income tax returns per year to the number of workforce age adults 18-65. That simple math would give a very accurate percentage of those who are actually working and the only meaningful error would be the tiny few who fail to file tax returns. Government reports are always skewed for political reasons. Figures don't lie, but liars do figure.

I wonder if reducing the work requirements for welfare had any impact on this number. If a recipient is not working, but is doing something that now qualifies as work wouldn't that person now be counted as being employed?

The point that I was trying to make, but couldn't due to truncation of my post and moderator delay, was that it is NOT necessary to have direct administration manipulation in order for this number to be biased and inaccurate. What is needed is to dig a bit into how the number is arrived at, and it should become clear that subtle biases among the data collectors and in the sample, can easily explain this small overall difference. I believe that the difference IS due to sampling bias which is related to the political sensitivity of this number and the proximity to the election. That is not the same as direct manipulation, and in fact is a much more effective opinion-shaping phenomenon for precisely that reason. If go off in search of some person or organization deliberately twisting the numbers, we will likely not find it. And yet, the numbers don't reflect reality, and I think they WILL revert but only after the election.

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